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Who Really Benefits From Extended Warranties?

Posted by Jane Clothier on 16 September, 2015

extended car warranty

When you’re buying a new car, there’s a strong chance that the dealer will offer you an extended warranty.


What exactly is it? While you’re sat in the showroom, it’s unlikely that you’ll have the time you need to consider the benefits and costs. You may assume that the extended warranty is a longer version of the manufacturer’s warranty with the same terms and conditions, but you’d be wrong.


A new car statutory warranty covers you for 12 months or 20,000km, whichever you reach first. This is the legal minimum. However, a manufacturer’s new car warranty is longer, covering two years or 40,000km, or in some cases, three years and 60,000km. Five years and 100,000km warranties aren't unheard of for luxury vehicles.


Warranties cover the cost of faults or repairs needed within a certain time frame, providing the car is in good condition for its age. Accessories fitted at the time of purchase are included. Batteries are usually covered on new cars only.


With the majority of new vehicles coming with two-year, 40,000km manufacturer’s warranties, it’s easy to see why dealers might encourage you to purchase an extended warranty that lasts longer. We've all heard of new car owners who've experienced a string of faults, only for their warranty to run out before the issue has been resolved.


You will hear that the extended warranty gives you peace of mind that you’ll never encounter such issues. Extended warranties usually only apply to certain types of mechanical failure and even then, there’s a limit on how much you can claim. Another catch is that you may have to have the car serviced by that particular dealer to retain the validity.


You should never sign up for one without reading the small print, so that you can weigh up the benefits against the additional cost. If you’ve not been given chance to do this, be even more cautious.


Each Australian state has different laws about manufacturers’ car warranties, but there is no regulation over extended service contracts, also known as extended warranties.


As is so often the case, ‘fore-warned is fore-armed’. Always find out in advance what is covered and what isn't. Remember that the dealer is aiming to make a profit, which means that you’re unlikely to use the warranty, or that the dealer and the warranty provider will still come out on top if you do.


Rather than pay large mark-ups to the middle men in return for being tied into a service deal, you should focus on buying a reliable vehicle that suits your budget and needs, and then maintain it well. This may mean spending more up front, but at least you’re receiving the benefit, not the dealer.


Are you looking for finance to help you purchase a new vehicle?

1800Approved is one of Australia's fastest growing car and asset finance brokers. We specialise in car finance, equipment finance, plus insurance and warranty services, and have previously arranged deals from AU$10k to AU$5m.

1800Approved services clients accross Australia, working with over 30 independent lenders to find the best deal.

We can also help with sourcing your new and used car warranty, and by sourcing vehicles and equipment through our Drive Wholesale arm.

To learn more about how we can help you, call us today at 1800 277 768

Topics: Warranty